public affairs analysis briefs

Analysis: Budget 2010

March 5, 2010 | public affairs

Background

Finance Minister Jim Flaherty delivered his fifth budget address in the House of Commons on March 4, 2010. Budget 2010 – which followed immediately on the heels of a Throne Speech delivered the day before – needed to re-launch the Conservative Government’s agenda in the face of unexpected backlash from the Prime Minister’s decision to prorogue Parliament, an increasingly thin fiscal envelope and increasingly volatile polling numbers. Doing more with less will not only become the new mantra of the public service, but a necessary MO for the government as it moves towards another election and its hopes of finally securing an elusive majority government.

Highlights

Budget 2010 was all about the tension between staying the course and certain electoral exigencies, including the issues discussed in the previous day’s Throne Speech. The promise to continue stimulus and other ‘priority’ spending until the economy is more stable was counterweighted with a commitment to begin the process bringing the budget back into balance starting with Budget 2011. The budget also includes some new initiatives as part of stimulus.

Specific initiatives and commitments include:

• $19 billion in fiscal stimulus (92% of which is already committed) is confirmed for Year Two of the Economic Action Plan;
• Spending will continue to grow until 2011 at which point it will be frozen and then begin to be scaled back in future years;
• On specific Year Two commitments, the Budget promises:
  
  
  • $3.2 billion in tax savings through both raising the basic minimum exemption and other benefits for children and others;
  • $4 billion to extend EI benefits;
  • $1.9 billion to attract and retain high-value talent in Canada; and o $2.2 to support industry and communities in need.
• Other focuses for the limited new spending include: ‘green’ jobs, modernizing Canada’s infrastructure, strengthening the financial sector, and a commitment to increase the Universal Child Care Benefit for single parents.

Following on many of the themes of yesterday’s Speech from the Throne, the budget includes language around a number of core-Conservative ideas of family, victims of crime, elite athletes, veterans, military families and seniors.

The overall largest commitment in the budget is to bring the Federal Government to a near balanced budget position by 2014-15. There were very few details provided on how this will be accomplished save specific commitments to reduce planned increases in spending at the Department of Defence and with Canada’s international aid commitments.

Opposition Response

Generally speaking, this has been the least dramatic budget stand-off since Prime Minister Harper’s first budget in 2006. With no clear advantage in polling numbers for any of the opposition parties, an election was never a likely response to Budget 2010. In terms of specifics, the Liberal Party (the Official Opposition) indicated that, while it was not pleased with many of the measures in Budget 2010 – including a lack of details on how to achieve balance, invest in job creation and the overall “laissez-faire” approach they feel the government has taken to recovery – it was not prepared to defeat the government or force an election at this time.

Despite the personal/health problems identified by Mr. Layton last month, the NDP was quick to condemn the Budget as insufficient in terms of addressing the concerns of their core constituencies. As a result, they will be voting against in the House of Commons. Despite the continuing decline of sovereignty issues in Quebec and the impact that has on the Bloc’s support, they were also quick to indicate their non-support.

In short, Budget 2010 would have had to have a poison pill in it (similar to the proposed elimination of political financing in Economic Update ’08 that precipitated the coalition crisis that followed) in order to create any serious political drama.

Analysis

The Government clearly did not expect the fierce reaction that initially greeted its decision to suspend Parliament for two months following the Christmas holidays. Upon returning to the House of Commons the government has been forced to put forward both a Speech from the Throne and a Budget at a time when there is very little fiscal wiggle room and, for the first time since the 2008 Election, the government polling numbers are (generally) trending in the wrong direction. Walking all those tight ropes is a tall order at the best of times. Today’s Budget has set the stage for a number of things: an issue-based contrast between the position of the Conservative Party and their political opponents – particularly the Liberals – is becoming clear for the first time in several years. The risk for the Conservatives is that if they cut the programs which are most ideologically attractive to their base, they will almost certainly loose the opportunity to expand their electoral coalition.

The additional challenge for the Conservative Party is that each of those choices becomes something the opposition may potentially attack with substantive objections and counterproposals. That is a very different environment from previous “good news budgets” that focused on new spending and tax reductions. The challenge for the Liberals is that if they propose counterproposals that cost money they will be accused of delaying the return to balanced budgets.

Finally, the Conservative Government needed to walk a careful line between doing as much as they could with the compressed fiscal envelope and making big enough changes to justify the two-month hiatus they took from Parliament. As presented, Budget 2010 does not go a long way in making that case on the government’s behalf.

What it means for GCI clients

The government has been clear: their agenda is narrow, focused and anyone looking for support on programs or projects will have to fit within both the government’s narrative and an extremely tight fiscal envelope. Cheap and cheerful has become the order of the day as the government finds itself facing a more volatile electorate and with no fiscal wiggle room. While this will certainly not preclude new ideas from coming forward, it will mean that the litmus tests applied by government will be far more stringent than in past years. Hearing what the government says will be only the first step in this process: having the insight to understand where they are going and how your issues will be impacted will be the difference between coming along for the ride and becoming political road kill.

That’s where GCI Group comes in. With a balanced team of government relations professionals, GCI is able to speak to your issues on all sides of this fractious Parliament and across the senior ranks of the Public Service. In both Houses of Parliament, in all Parties and with officials that matter, GCI can help ensure you and your issues get the hearing they deserve.

For more information, please contact one of our Public Affairs experts directly, including our newest member of the team, Lynne Hamilton, another one of Canada’s Top 100 Lobbyists.